190802 tariff war
US President Donald Trump (left) and China's leader Xi Jinping (right) Image Credit: AFP

WASHINGTON, BEIJING: US President Donald Trump on Friday said Washington and Beijing could be on the cusp of sealing a partial trade deal but reiterated he was in no hurry to sign.

His remarks were a rejoinder to statements made hours earlier by Chinese leader Xi Jinping, who told a gathering of dignitaries in Beijing that China wanted a deal but was “not afraid” to fight back if needed.

“We have a deal, potentially very close,” Trump said during a freewheeling interview on Fox News. “He wants to make a deal much more than I want to make it. I’m not anxious to make it.”

Trump added that revenues from tariffs on Chinese imports were a windfall for the United States, something economists say is in fact weighing on the economy.

The US president’s remarks did little to clarify whether the two parties are in fact making progress in finalising the text of the “phase one” agreement Trump announced last month.

China has called for a rollback of existing US tariffs as part of the agreement but US officials have said instead they could consider delaying a fresh round of duty increases that are set to take effect on December 15.

The US-China trade conflict is now well into its second year, with hundreds of billions of dollars in two-way trade subject to steep duties.

“We didn’t initiate this trade war and this isn’t something we want,” Xi reiterated in a meeting on Friday with prominent international visitors to Beijing including former US Secretary of State Henry Kissinger. “When necessary, we will fight back, but we have been working actively to try not to have a trade war.”

Just a few days ago, Trump said China wasn’t “stepping up to the level that I want” in the negotiations amid doubts about whether the two sides can hammer out a written agreement. On Wednesday, China’s chief trade negotiator, Liu He, indicated he was “cautiously optimistic” about reaching the first phase of a deal.

Liu made the comments in a speech in Beijing on Wednesday ahead of the New Economy Forum, which is being organised by Bloomberg Media Group, a division of Bloomberg LP, the parent company of Bloomberg News. Some of the foreigners who met with Xi on Friday were also in Beijing to attend the forum.

China’s dream

Xi emphasised that China’s overall goal wasn’t “a dream about hegemony” but was rather “working to realise the Chinese dream of renewal” and to ensure that China was never humiliated again.

“We are just trying to restore our place and role in the world rather than reliving the humiliating days of semi-colonial and semi-feudal era,” Xi said. “In those days there were signs in Shanghai saying Chinese and dogs are not allowed inside — and we will not relive those days again.”

One of the three key demands for any trade deal with the US is that it should be “balanced” to ensure the “dignity” of both nations, indicating that this quest for respect still motivates policy.

Since Trump announced the phase one deal a month ago, markets have been whipsawed by comments from both sides, first indicating progress, and then the opposite.

The latest potential hurdle came after Liu made his dinnertime comments, when the US House voted 417-1 for legislation supporting Hong Kong protesters that has already been unanimously approved by the Senate. Trump plans to sign it, according to a person familiar with the matter.

Financial sovereignty

Xi on Friday also shed some more light on China’s plans to open up its financial markets. He said the reforms set in motion will not stop, but that the nation needs to be careful and will also ensure its “financial sovereignty.”

The Chinese leader spoke to more than a dozen people including former US government officials such as Hank Paulson and Gary Cohn. Bloomberg LP Chairman Peter Grauer also attended the meeting.

China has this year sped up the opening of its $40 trillion financial market, and will next year give the go-ahead for foreign securities firms to take full ownership of joint ventures they have in the country. Officials in Beijing are seeking to attract foreign investments to support economic growth, which in part has been hurt by a crackdown on lending at their local banks after years of rapid growth.

Top executives from banking firms such as Goldman Sachs Group Inc were also in Beijing attending the forum, flagging that they were preparing major investments and expansions in the country to capture an estimated $9 billion in annual profits.

Brock Silvers, managing director at Adamas Asset Management in Hong Kong, said Xi’s emphasis on financial sovereignty signals Beijing’s unwillingness to cede too much control.

“Where reform conflicts with state economic authority, the Xi Administration will continue to support the statist position,” he said. “This policy, which could effectively restrict larger systemic reform, also seems to be a major factor in the ongoing repatriation of China’s offshore listed giants like Alibaba.”